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Stochastic Orders of Proposing Players in Bargaining

Author

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  • Harold Houba

    (Faculty of Economics and Business Administration, Vrije Universiteit Amsterdam)

Abstract

The bargaining model with stochastic order of proposing players is properly embedded in continuous time and it is strategically equivalent to the alternating offers model. For all parameter values, the pair of equilibrium proposals corresponds to the Nash bargaining solution of a modified bargaining problem and the Maximum Theorem implies convergence to the Nash bargaining solution when time between proposals vanishes. The model unifies alternating offers, one-sided offers and random proposers. Only continuous-time Markov processes are firmly rooted in probability theory and offer fundamentally different limit results.

Suggested Citation

  • Harold Houba, 2005. "Stochastic Orders of Proposing Players in Bargaining," Tinbergen Institute Discussion Papers 05-063/1, Tinbergen Institute.
    • Handle: RePEc:tin:wpaper:20050063
    as

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    File URL: https://papers.tinbergen.nl/05063.pdf
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    References listed on IDEAS

    as
    1. Rubinstein, Ariel, 1982. "Perfect Equilibrium in a Bargaining Model," Econometrica, Econometric Society, vol. 50(1), pages 97-109, January.
    2. Nash, John, 1953. "Two-Person Cooperative Games," Econometrica, Econometric Society, vol. 21(1), pages 128-140, April.
    3. Ken Binmore & Ariel Rubinstein & Asher Wolinsky, 1986. "The Nash Bargaining Solution in Economic Modelling," RAND Journal of Economics, The RAND Corporation, vol. 17(2), pages 176-188, Summer.
    4. Merlo, Antonio & Wilson, Charles A, 1995. "A Stochastic Model of Sequential Bargaining with Complete Information," Econometrica, Econometric Society, vol. 63(2), pages 371-399, March.
    5. Houba, Harold, 1993. "An alternative proof of uniqueness in non-cooperative bargaining," Economics Letters, Elsevier, vol. 41(3), pages 253-256.
    6. Taiji Furusawa & Quan Wen, 2003. "Bargaining with stochastic disagreement payoffs," International Journal of Game Theory, Springer;Game Theory Society, vol. 31(4), pages 571-591, September.
    7. Shaked, Avner & Sutton, John, 1984. "Involuntary Unemployment as a Perfect Equilibrium in a Bargaining Model," Econometrica, Econometric Society, vol. 52(6), pages 1351-1364, November.
    8. Muthoo,Abhinay, 1999. "Bargaining Theory with Applications," Cambridge Books, Cambridge University Press, number 9780521576475, November.
    9. Hoel, Michael, 1987. "Bargaining games with a random sequence of who makes the offers," Economics Letters, Elsevier, vol. 24(1), pages 5-9.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Harold Houba, 2008. "Computing Alternating Offers And Water Prices In Bilateral River Basin Management," International Game Theory Review (IGTR), World Scientific Publishing Co. Pte. Ltd., vol. 10(03), pages 257-278.
    2. Houba, Harold, 2007. "Alternating offers in economic environments," Economics Letters, Elsevier, vol. 96(3), pages 316-324, September.

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    More about this item

    Keywords

    Bargaining; Negotiation; Alternating offers; Markov process; subgame perfect equilibrium; Nash bargaining solution; Maximum Theorem;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory

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